Many people have no idea what happens to their money. It justseems to “disappear.” Here’s how to out how whereyours goes:
List the bills you pay every month.For one month, jot down everything you buy and theprice—no matter how little it costs.At the end of the month, categorize the items you’ve listed:“Food,” “Transportation,” etc. Then break down each category;for example, “Food: School Lunches, Snacks, Restaurants.” Nowyou know where your money goes.The Urge to Splurge Advertising and peer pressure temptus to buy things we don’t need. Which of the items youcategorized above were things you needed, like gym shoes oran ink cartridge? Which ones were things you just wanted:take-out pizza or that CD you played only once? Those areimpulse purchases. They don’t seem expensive when you buythem, but they can keep you from reaching larger goals like avacation, a cool car, or college.Think Before You Buy Before you buy an item, askyourself whether the item is worth the time you’ll have to workto pay for it. The better you get at saying “no” to unnecessaryspending, the more money you’ll have for what’s importantto you.Creative BudgetingUsing the expenses you listed before, complete a chart like theone on the next page. Look at each expense in column 2 andthink of ways to reduce it. Enter the lesser amount in column 3,your New Budget. Be sure to budget 10 to 30 percent of yourincome for “Savings.” (To see why, go to Saving and InvestingSkill.) Total column 3 to see if your budget matches yourincome. If not, you’ll need to keep trimming expenses until itdoes or another source of income.Personal Finance HandbookBudgeting:Take control of your cashDid you really need that cashmere sweater or those $200 sneakers? Howdid you get $5,000 in debt? Getting control of what you spend—budgeting—is askill you’ll need throughout your life.ETT_EM_R1_R33_FinHndbk.indd R4 2/2/10 9:56:53 AMBuilding Your BudgetPart-time Job: $______Monthly allowance: $______Total income: $______Spending Category Current Expenses New BudgetFood:School lunchesRestaurants & take-outSnacksTransportation:Car paymentInsuranceGasolineMaintenance (estimate)Entertainment:MoviesMusicGamesSports and hobbiesPersonal care:ClothesShoesHaircutsAccessoriesCosmeticsSavings (10–30% of income)Utilities:PhoneInternet accessMedical/dentalDonations to charityMiscellaneous
Test Your Financial Fitness
Listing List five ways you can start saving money. How much couldyou save in a year by cutting these costs?Explaining Why is it important to live on a budget?Applying Choose a career you like and research its average annualsalary. Using that salary, construct a one-year budget plan using thebudget worksheet above
Where Does Your Money Go?